Transferring Money from UK to Spain - the Cheapest Ways

In the heat of on-going Brexit debates, with the possibility of a no-deal still looming, the logistics of living, retiring or investing abroad could get a whole lot more complicated. Whilst it's likely that a smooth transition should be mutually agreed upon, the matter of currency is still an issue.

There is currently a lot of volatility with both the Euro and Sterling. Whilst the current Sterling price factors in the possibility of a no-deal, the manifestation of a no-deal (or bad deal) could potentially devalue the pound by up to 10% - which would give Pound-Euro parity. 

When transferring money from the UK to Spain, you can ensure that you're not wasting any more money than is necessary by attaining the cheapest rates possible. The mid-market rate is the "real" price of the currency, so you want to get a quote as close to this as possible.

What are your options to transfer money from Spain to the UK?

There are currently a handful of options when wanting to transfer currency abroad. Here are the main 5 methods:

Swift/Bank transfer 

Swift transfers via a bank are the most common way to transfer money. Whilst this is a highly secure option, it’s not necessarily the fastest, as transfers can take up to several working days. Such transfers will require the recipients BIC/account number and possibly banking address. 

The biggest issue here is that banks aren’t always up front about the margin they will take when exchanging the money.  Usually, it is around 3% to 5%, which is very high. On top of this, there’s often a flat fee when sending money abroad, such as £/$ 20. This makes it one of the most expensive ways to send money.

PayPal

PayPal is extremely convenient, and most people have an account already. Sending money is often fairly fast, but it is far from cheap. PayPal currently charges a 3.4% cross border fee for UK/Spain. Strangely enough, there is no option to simply convert money internally and have a multi-currency wallet. It’s somewhat possible, but users cannot withdraw that money into a foreign bank. Essentially, it’s extremely restricted, confusing and costly to deal with PayPal.

Money Transfer Companies

Money Transfer Companies are seen as the alternative option when it comes to currency and remittance. Their underlying infrastructure is very alternative, and they are able to attain currency at the inter-banking rate most of the time. This is a convenient option, given that signing up takes all of five minutes usually.

They usually come in the form of a mobile app, where exchanges can take place in a couple of clicks. Transferring money from Spain to UK, or vice versa, can be done with a spread between 0% and 1%.

Currency store's / Airport 

Currency stores are a good option if you need quick cash, but it isn’t something you should plan to use. Whilst some currency stores can offer reasonable rates, ones inside airports and tourist spots can offer 2%+ margins. These are convenient however if you’re looking for physical cash without signing up to platforms or wait for money to transfer.

Cryptocurrency

Cryptocurrency is marketed as a frictionless, utopian infrastructure but it isn’t totally true. It would be, if countries recognised it as legal tender and/or most businesses accepted it as payment, but given that they don’t it means this method will involve two transactions as opposed to one - from Pounds currency to your chosen cryptocurrency, and then again to Euros. Or vice versa. This isn't optimal and can amount up to significant losses in the spread/commission. 

What is the cheapest way to transfer money to Spain?

The cheapest method of transferring money abroad is with a money transfer company. It's a common theme, that fintech startups are quickly outperforming multinational corporations at their own game in many industries. 

Between major currencies, you will always find the margin to be under 1.5%, but often as low as 0.5% or even 0%. As a rule of thumb, question any quote that is above 1% margin and fees put together. 

Furthermore, if you’re looking for cash, then some MTCs will have cards that can be used at ATMs. This means that you can withdraw Euros in Spain with your GBP account and receive a very competitive rate, and likely better than a currency store. Just remember, ATMs can often have their own fee, so look out for free ATMs.

Other methods

Keeping savings diversified in both Pounds and Euros. This could not only be a savvy move when it comes to mitigating losses, but it could mean transferring money less often. If you receive Euros but live in the UK, it may be wise to keep the Euros if you’re not desperate for the money. Then, the next time you need Euros, you have saved yourself not one but two currency exchanges.

Hedging 

With the current volatility of the market, you can receive a few percent less depending on the day of the week. Not to mention if Brexit isn’t resolved in a good deal, we may see extremely large swings in the price that make PayPal’s commission look insignificant.

This is very important to mitigate if you’re looking to transfer a large amount of money in the future. Locking in a pre-agreed rate with a Forward Contract at a Money Transfer Company could prevent significant losses in the future, thus giving you a better rate than anyone else in the market.